Approaches to cost minimization of power systems with distributed generation

... closer to heat loads Customers will desire to control over service quality and reliability Power electronics will enable operation of semi-autonomous systems 21 Chapter OVERVIEW OF DISTRIBUTED GENERATION. .. performance /cost benchmark that other types of DER must meet to see any significant market success 14 Chapter OVERVIEW OF DISTRIBUTED GENERATION Gas Turbine Powered Distributed Generators Gas turbine... DER due to their nature of being small, modular, and geographically distributed They include solar thermal power generation resource, photovoltaic (PV) generation resource, wind-powered generation

APPROACHES TO COST MINIMIZATION OF POWER SYSTEMS WITH DISTRIBUTED GENERATION

LI WEI

(B ENG)

A THESIS SUBMITTED FOR THE DEGREE OF MASTER OF ENGINEERING

DEPARTMENT OF ELECTRICAL AND COMPUTER ENGINEERING

NATIONAL UNIVERSITY OF SINGAPORE

2003

ACKNOWLEDGEMENTS

It is in great appreciation that I would like to thank my supervisor, Associate Professor

Chang Che Sau, for his invaluable guidance, encouragement, and advice in every phase

of this thesis It would have been an insurmountable task in completing the work without

him

I would like to extend my appreciation to Mr Lee Chaihwa, for his generous help and

valuable advice on this thesis

Thanks and gratitude are also towards all the people in the Power Systems Laboratory for

their being helpful and kind to me in the past two years In particular, I would like to

thank Mr Seow Hung Cheng, for his cooperation and support throughout this research

project

Finally, I wish to express the heartiest gratitude to my parents, for their love, patience,

and continuous support all along the years

PAPERS WRITTEN ARISING FROM WORK IN THIS

THESIS

C.S Chang, Li Wei, Tan Chon Haw, “Framework for Integrating Distributed

Generation to Improve Overall Economy and Power Quality,” Proceedings of The

International Power Quality Conference, 2002, Singapore, Volume 2, 21-25 Oct

2002, Pages 425 - 432

C.S Chang, Li Wei, “Generation Dispatch of Deregulated Energy Resources Using

Stochastic Modeling,” the International Federation of Automatic Control (IFAC)

Symposium on Power Plants and Power Systems Control (PP & PSC) 2003, Seoul,

accepted for presentation

TABLE OF CONTENTS

ACKNOWLEDGEMENTS i

PAPERS WRITTEN ARISING FROM WORK IN THIS THESIS ii

TABLE OF CONTENTS iii

SUMMARY vi

LIST OF FIGURES viii

LIST OF TABLES x

Chapter 1 INTRODUCTION 1

1.1 BACKGROUND OF THE RESEARCH 2

1.1.1 The Ongoing Industry Restructure 2

1.1.2 DER on Rapid Rise 3

1.1.3 Different Targets of Utility and DERs 5

1.2 OBJECTIVE OF THE RESEARCH 6

1.3 ORGANIZATION OF THE THESIS 7

Chapter 2 OVERVIEW OF DISTRIBUTED GENERATION 9

2.1 DISTRIBUTED ENERGY RECOURSE 10

2.1.1 Reasons for the Creation and Marketing of DERs 10

2.1.2 Benefits Brought by DERs 11

2.1.3 DER Categories 13

2.2 MICROGRIDS 20

2.2.1 Concept and Benefits of Microgrid 20

2.2.2 Hypotheses for Practical Microgrid 21

2.4 VIRTUAL UTILITY 26

Chapter 3 THE ITERATION APPROACH 28

3.1 OUTLINE OF THE MULTI-OBJECTIVE FRAMEWORK 29

3.1.1 The Formulation of the Utility Module 30

3.1.2 The Formulation of the DER Module 32

3.1.3 The Customer Module 35

3.1.4 Derivation of the Buy-Back Price 37

3.1.5 The Iteration Mechanism and the Convergence Criteria 38

3.2 SOFTWARE IMPLEMENTATION OF THE ITERATION APPROACH 40

3.3 THE STUDY SYSTEM 43

3.4 SIMULATIONS AND RESULTS 46

Chapter 4 THE STOCHASTIC MODEL TO INTEGRATE VIRTUAL UTILITY 57

4.1 OUTLINE OF THE STOCHASTIC MODEL 58

4.2 MODELING OF DER OUTPUT BASED ON PROFITABILITY 61

4.3 MODELING OF DER AVAILABILITY 61

4.4 INTEGRATION OF DERS INTO VIRTUAL UTILITIES 64

Chapter 5 THE MODIFIED ECONOMIC DISPATCH 69

5.1 INTRODUCTION TO CONVENTIONAL ECONOMIC DISPATCH 70

5.2 MODIFIED ECONOMIC DISPATCH ACCOMMODATING DERS 72

5.3 COMPUTATIONAL SOLUTION TO THE MODIFIED ECONOMIC DISPATCH 74

Chapter 6 THE MODIFIED UNIT COMMITMENT 77

6.1 OVERVIEW OF UNIT COMMITMENT 78

6.1.1 Unit Commitment Constraints 78

6.1.2 Techniques for Unit Commitment Solution 79

6.2 INTRODUCTION TO DYNAMIC PROGRAMMING ALGORITHM 80

6.3 MODIFIED UNIT COMMITMENT ACCOMMODATING VIRTUAL UTILITIES 83

PROGRAMMING 89

Chapter 7 SIMULATION OF THE DER INTEGRATION APPROACH 92

7.1 SOFTWARE IMPLEMENTATION OF THE DER INTEGRATION APPROACH 93

7.2 SIMULATION AND RESULTS 94

7.3 CASES COMPARISON 100

7.3.1 Case A vs Case C 101

7.3.2 Case B vs Case D 103

7.3.3 Case C vs Case D 104

Chapter 8 CONCLUSIONS AND RECOMMENDATIONS 108

8.1 CONCLUSIONS 109

8.2 RECOMMENDATIONS FOR FUTURE RESEARCHES 111

REFERENCES 112

Appendix NUMERICAL CONVOLUTION USING RECURSIVE TECHNIQUE 116

SUMMARY

Utility restructuring, technology evolution, an expanding power market, and

environmental policies are providing the impetus for the growth of distributed energy

resource (DER) into an important energy option Advanced technologies, deployed in

different categories of DERs, endow these dispersed generators with numerous salient

advantages and make them competitive in power generation DERs are playing an

increasingly vital role in the restructuring environment and benefit many stakeholders:

the utility, independent power producers, and electricity consumers In order to achieve

technical and economic benefits, some DERs are clustered together to form microgrids,

power parks, or virtual utilities Through advanced control and communication, these

integrated DERs are more controllable, flexible, and competitive Recent years have seen

a quick and steady increase of DER generation capacity in many countries

As DERs have an escalating economic impact on the power system, the conventional

utility cost minimization algorithms developed for the non-DER environment should be

modified to take into account the involvement of DERs This research aims to meet this

challenge In this thesis, two enhanced overall cost minimization approaches are

developed for the hybrid generation environment

The first approach is the Iteration Approach In this approach, a multi-objective

framework is set up consisting of three modules, namely, utility module, individual DER

generation cost, the DERs focus their attention on maximizing individual profits These

different objectives are achieved within their respective modules Coordination between

the utility generators and DERs is maintained by iterative calculation This approach

guarantees minimum overall cost with the involvement of DERs However, this approach

is computationally intensive

The second approach, the DER Integration Approach, is more computationally efficient

First, a stochastic model is developed to integrate DERs having homogeneous cost

characteristics into virtual utilities Next, the conventional economic dispatch and unit

commitment algorithms are modified to accommodate these integrated virtual utilities

Finally, the solution of these modified algorithms gives the minimum overall cost of both

utility generators and DERs Unlike the first approach, this approach also takes into

account the availability of the DERs

These two approaches, along with a conventional non-DER approach, have been applied

on a test system Comparisons of these resulting minimum generation costs confirm the

positive economical impact of DERs on the system After introducing DERs into the

system, the utility reduces its cost; DER operators make profits; and the demands of

consumers are satisfied All the parties benefit from the involvement of DERs in the

generation competition

LIST OF FIGURES

Figure 2.1 U.S non-utility net generation by fuel source (2002), (U.S DOE Energy

Information Administration) 13

Figure 3.1 A multi-objective framework 30

Figure 3.2 Economist’s diagram of demand/price and generation/cost curves 36

Figure 3.3 Flow chart of the program for the Iteration approach 42

Figure 3.4 A 24-hour load forecast outline 45

Figure 3.5 The outline of system lambdas for the non-DER environment (Case A) 49

Figure 3.6 Total utility output over 24-hour period in the hybrid generation environment (Case B) 50

Figure 3.7 Total DER output over 24-hour period in the hybrid generation environment (Case B) 51

Figure 3.8 System lambdas over 24-hour period in the hybrid generation environment (Case B) 51

Figure 4.1 Steps of virtual utilities integration 59

Figure 4.2 PDF of the output P j R of DER j 63

Figure 4.3 PDF of the output of virtual utility k 65

Figure 5.1 The hybrid generation environment with the involvement of DERs 72

Figure 5.2 Including virtual utilities in lambda searching 75

Figure 5.3 λ adjustment 76

Figure 6.1 The seven possible system states for a system with 3 utility generators 81

Figure 6.2 System state diagram of dynamic programming 82

Figure 6.3 Two ways to add virtual utilities into the system 87

Figure 7.1 The flowchart of DER integration approach 93

Figure 7.2 Total utility output over 24-hour period in the hybrid generation environment

(Case C) 98

Figure 7.3 Total DER output over 24-hour period in the hybrid generation environment

(Case C) 98

Figure 7.4 The outline of system lambdas for the Non-DER environment (Case C) 100

Figure 7.5 Total utility costs under different DER availabilities (Cases A, B, and E) 106

Figure 7.6 Total DER Profit under different DER availabilities (Cases A, B, and E) 106

LIST OF TABLES

Table 2.1 Comparison of gas turbine generator categories [9] 16

Table 2.2 Typical fuel cell DER cost compared to representative DERs of other types [9] 18

Table 3.1 Characteristics of utility generators 43

Table 3.2 DER Characteristics 44

Table 3.3 DER data of virtual utilities 45

Table 3.4 Initial state of utility generator 46

Table 3.5 Hourly output of utility generator and utility generation, accumulative costs in the non-DER environment (Case A) 48

Table 3.6 Hourly output of utility generator and utility generation, accumulative costs in the hybrid generation environment (Case B) 52

Table 3.7 Hourly output and economic data of virtual utility in the hybrid generation environment (Case B) 53

Table 3.8 The results of simulations for Cases A and B 55

Table 6.1 Comparison of two approaches 88

Table 7.1 DER data of virtual utilities 95

Table 7.2 Hourly output (MW) of utility generator in the hybrid generation environment (Case C) 96

Table 7.3 Hourly output (MW) of virtual utility in the hybrid generation environment (Case C) 97

Table 7.4 The system hourly generation and accumulative costs (Case C) 99

Table 7.5 The results of simulations for Cases A, B, C, and D 102

Table 7.6 The results of simulations for Case E 107

Chapter 1 INTRODUCTION

The first part of this chapter provides the background information of this research Power

system restructuring, the fast boost of distributed energy resources (DERs), and the

different targets of DER and utility are discussed in the chapter Secondly, the objective

of this research is listed Lastly, the organization of the thesis is given

1.1 BACKGROUND OF THE RESEARCH

1.1.1 The Ongoing Industry Restructure

The electric power industries in many parts of the world are undergoing widespread

restructuring These restructuring primarily involve a transition from vertically integrated

monopolies to competitive open-market systems [1]

In many developed countries, energy marketplaces are completely deregulated by

unbundling the original vertically integrated monopolies Utilities in these countries

experience the segregation of generation, transmission and distribution into independent

competitive commercial entities The generation of utilities is split up into a number of

smaller independent competing generating companies (gencos) New independent power

producers are welcomed to participate in the generation The segregation of transmission

and distribution creates numbers of new geographically separated transmission

companies (trancos) and independent distribution companies (discos) [2]

In developing countries,the electric power industries are in different evolution stages of

the open energy market Some utilitiesare experiencing re-regulation In these countries,

the lack of investment makes the reinforcement of the infrastructure lag far behind the

soaring increase of the load demand Generation competition from independent power

producers is encouraged for the purposes of reducing the heavy burden on utilities and

postponing of bulk investment The industry restructuring also allows the customer more

freedom than ever before, to choose an energy provider, method of delivery, and ancillary

service [3]

1.1.2 DER on Rapid Rise

Distributed energy resource (DER) generally applies to relatively small generation or

energy storage units, scattering throughout a power system, to provide the electric power

at or near consumer sites Presently a number of DER categories exist A wide variety of

technologies have been applied to these different categories, covering both the

improvement of conventional technologies as well as innovative new approaches The

gas turbine generator, which evolved from aircraft or truck engines, and the solar cell,

which adopts the latest in photovoltaic technology, are two good examples

Deployed with advanced technologies, DERs are economically competitive and play an

important role in the restructuring environment Furthermore, the emergence of

microgrids, power parks, and virtual utilities extends the distributed generation(DG)

concept by encompassing several DERs linked together using advanced sensor,

communication, and control technologies These integrated DER clusters are more

controllable, flexible, and competitive compared with single DER unit [4]

Because of increasing demands, the energy industries are facing two main challenges:

Although the former can be solved by the expansion of utility generation capacity, DER

provides a satisfactory solution for both

Utility restructuring, technology evolution, increasing demands, and environmental

policies are providing the impetus for DER’s growth as an important energy option In

many countries, DERs are experiencing a rapid rise Data from an internet source shows

that up to 2002, there are about 30~60 GW of DER in U.S, accounting for 4~8 percent of

total electricity generating capacity [5]

As DERs play an increasingly vital role in the new restructuring environment, they

benefit many stakeholders Electricity consumers can achieve a lower cost of power as

well as improved reliability and additional security of supply Utility can use DERs to

defer expansion of the transmission and distribution infrastructure, reduce power system

losses, and enhance system reliability Independent power producers can elect to add

renewable energy to their portfolio where it can offer emissions credits, fuel security, and

enhanced marketing value Energy service companies can install DERs at customer sites

and sell services such as reliability and heat (cogeneration) along with traditional

electricity to create a new revenue stream Finally, the society as a whole stand to benefit

from having a less centralized power system that is more resistant to natural and

man-made disasters, such as an earthquake or a war

1.1.3 Different Targets of Utility and DERs

The ongoing re-regulation of generation represents the first step towards departing from

the centralized paradigm, while the emergence of microgrids, power parks, and virtual

utilities represents the second The non-DER power system is evolving into a hybrid

generation environment In accordance with their independent incentives, these integrated

DERs will develop their own independent operational standards, which will significantly

affect the overall operation of the power system In other words, the power system will be

operating according to dispersed independent targets, not a coordinated global one The

previously strictly hierarchical system is partially stratified into two layers as below [6]

The upper layer macrogrid is the high voltage meshed power grid, macrogrid A limited

set of large utility generators are under the control of a centralized control center

Through it, the utility commit and dispatch its units coordinately to achieve its target of

the overall cost minimization, and maintain the energy balance and power quality

In the lower layer, local DER-clustered entities control the DERs jointly within the entity

to meet end-user requirements for energy, maintain power quality and reliability, and

above all, make profits These entities such as microgrids, power parks, or virtual

utilities, are owned or leased by independent power producers, end-users, or utilities In

most cases, they are profit-making entities Unlike utilities, these operators consider the

individual benefits as their economic targets, regardless of the overall system benefits

to the buy-back electricity prices The outputs of the DERs will be decided separately by

these independent operators

Due to the ongoing system restructuring and the rapid increase of the DER generation

capacity, DER is starting to have a remarkable effect on system operations

Conventionally, to achieve the minimum cost target, utilities used to optimally allocate

forecasted load demands among utility generators only As DERs pour a large amount of

electricity into the system, utilities have to revise its dispatch plan and reduce their

allocated output in order to maintain the energy balance As a result, the outputs of utility

generators deviate from the preset optimum solution and the utilities’ minimum cost

target is hence compromised This calls for new approaches to achieve system’s

minimum overall cost taking into consideration the involvement of DERs However the

implementation of the new approaches will not be straightforward because of the

different targets between the utility and DERs, as discussed above

1.2 OBJECTIVE OF THE RESEARCH

In a non-DER system, utility cost minimization is achieved through economic dispatch

and unit commitment algorithms As DERs become an important option of generation,

conventional utility cost minimization algorithms need to be modified to cater for the

hybrid generation environment The involvement of DERs has to be considered in the

new solutions The objective of this research is to meet this challenge In this thesis, two

enhanced approaches to the overall cost minimization problem are developed and applied

on a test system The conventional non-DER approach is also applied on the same test

system Minimum overall costs are worked out using these different approaches and the

results are compared The comparison of the results shows that DERs yield lower

minimum overall costs than that of the non-DER system This clearly demonstrates the

positive impact of DERs on power systems

The first approach, the Iteration Approach, sets up a multi-objective framework

consisting of three modules The different objectives of utility, DER, and customer are

achieved within the respective modules Coordination among them is maintained by

iterative calculation However, this approach is computational intense It is presented in

Chapter 3

A second approach, namely the DER Integration Approach, is explicated in Chapters 4 to

7 for its computational efficiency In this approach, a stochastic model is established to

integrate DERs into virtual utilities Modified economic dispatch and unit commitment

are set up and applied to accommodate these virtual utilities Solving them gives the

minimum overall cost of both utility generators and DERs This approach also takes the

availability of DER into account

1.3 ORGANIZATION OF THE THESIS

This thesis is organized into 8 chapters, which are briefly described as follows:

The first chapter, the introduction, provides the background information of this research

Power system restructuring, the fast and steady boost in DER generation capacity, and

the different targets of utility and DERs are discussed in the chapter Also involved in this

chapter is the objective of this research Chapter 2 gives an overview of the distributed

generation concept, including DER, microgrid, power park, and virtual utility

Chapter 3 explicates the Iteration Approach developed by this thesis Case studies are

given for a quantitative assessment of this approach

Chapters 4 to 7 elaborate on the DER Integration Approach, which is computational more

efficient Chapter 4 explains a stochastic model to integrate DERs with homogenous cost

characteristics into virtual utilities Chapters 5 and 6 describe how the conventional

economic dispatch and unit commitment, respectively, are modified to accommodate

these integrated virtual utilities In Chapter 7, case studies are applied and results of

different approaches are compared and discussed

Finally, Chapter 8 summarizes the conclusions of this research and provides

recommendations for the scope of future researches

Chapter 2 OVERVIEW OF DISTRIBUTED GENERATION

DERs are playing an increasingly important role in the restructuring environment

Widespread deployment of fully integrated DERs further enables advanced operating

concepts, such as microgrid, power park, and virtual utility Though these advanced

concepts are presently not practical or viable for large scale application, they hold the

potential for providing the high reliability, quality, security and availability of electrical

service required by the society in the near future This chapter draws an outline of the

distributed generation concept and gives a survey on these advanced technologies It

begins with a review of DER, followed by introductions to microgrid, power park, and

virtual utility

2.1 DISTRIBUTED ENERGY RECOURSE

2.1.1 Reasons for the Creation and Marketing of DERs

The DER generally applies to relatively small generating units and energy storage units,

scattering throughout a power system, to provide electric power needed by consumers

There are several possible reasons for the creation and marketing of DERs [7]:

• Utilities are undergoing widespread re-regulation and de-regulation

• DERs are dropping in price, and technologies for data communications and

control are increasingly intelligent

• Demand for electricity is escalating globally

• Regional and global environmental concerns have placed a premium on efficiency

as well as environmental performance

• Customer is allowed to have more choices and concerns have grown regarding the

reliability, price, and quality of electric power

The above-mentioned reasons are defining a new set of power supply requirements that

can only be served through DERs in a system of small decentralized power plants

situated close to end-users DERs can supply electricity to a single location, or pump

power directly into the regional or national electricity grids [8] They can be utilized in

different applications, including standby power, combined heat and power (CHP), peak

shave, grid support, and as a stand-alone system

2.1.2 Benefits Brought by DERs

Actual benefits of these DER applications can be broken up into three categories as

described by U.S Federal Energy Technology Center (FETC): customer benefits,

supplier benefits, and national or general benefits Some of the prominent benefits are

listed here briefly [7] [27]

Customer benefits include:

• Ensuring reliability of energy supply

• Providing the power quality needed in many industrial applications dependent on

sensitive electronic instrumentation and control

• Enabling savings on electricity rates by self-generating

• Providing the opportunity for ‘waste’ heat utilization

Supplier benefits include:

• Limiting capital exposure and risk

• Avoiding unnecessary excessive capital expenditures

• Avoiding peak load constraints or price spikes

• Reducing / eliminating of transmission and distribution charges

• Offering a relatively low-cost entry point into a competitive market

• Opening markets in remote areas without transmission and distribution systems

National/general benefits include:

• Reducing greenhouse gas emissions by increasingly employing renewable energy

resources

• Responding to increasing energy demands and pollutant emission concerns while

providing low-cost, reliable energy

The most important advantages of distributed generation are its potentials to improve the

reliability of the power supply, reduce emissions of air pollutants, and minimize the total

generation cost

Because DER serves power at or near the consumer sites, it can avoid energy congestions

in peak time, by supporting all or part of the local demand in the case of transmission or

distribution network disruption Therefore, this can lead to an overall improvement in the

power supply reliability, which has become an area of increasing concern as a result of

the recent electricity service disruption in many parts of the world A large percentage of

DER harness renewable resources to generate electricity Compared to other types of

generation, they are environmentally friendly and emit fewer greenhouse gases Taking

into account the environment concerns, which may be in the form of an air pollution

penalty, these renewable distributed energy resources will become increasingly

competitive and have a more important place in the DER family The potential of

distributed generation to minimize the power system cost is the focus of this thesis and

will be discussed in the following chapters

2.1.3 DER Categories

Advanced technologies are applied to different categories of DERs, from mature

reciprocating engines to innovative fuel cells Figure 2.1 illustrates distributions of

non-utility net generation of different fuel sources in U.S in year 2002

Solar Wind Biomass

Gas

Coal Petroleum Gas Nuclear Power Hydroelectric Geothermal Biomass Wind Solar

Figure 2.1 U.S non-utility net generation by fuel source (2002), (U.S DOE Energy

Information Administration)

The characteristics of different DER categories are briefly introduced below

Reciprocating Engines Distributed Generators

The internal combustion reciprocating piston engines, fueled with fossil, are the oldest

type of DER technology, but the most popular type of DER generator in use presently

The two most commonly used reciprocating engines are spark and compression ignition

engines The size of these distributed generators ranges from less than 5 kW to more than

25,000 kW

Reciprocating piston engines are a proven, mature, but still improving method for

distributed generation system The thermal efficiencies of reciprocating engines can reach

as high as 40% The salient advantages of reciprocating engines are a low-cost

manufacturing base and simple maintenance needs Their disadvantages include a general

lack of good “waste” heat for co-generation applications, exhaust emissions, noise, and

vibration

Despite their disadvantages, reciprocating engines are the most popular DER in use

worldwide and have tremendous potential for future improvement They set the

performance/cost benchmark that other types of DER must meet to see any significant

market success

Gas Turbine Powered Distributed Generators

Gas turbine generators use a turbine spun by the gases of combustion to rotate an electric

generator Gas turbine generators have distinctly different size, fuel, efficiency, and

operating characteristics that in many situations give them considerable advantages over

other types of DER

Gas turbine generators are available in a wide variety of sizes, corresponding to three

categories: micro, mini and utility gas turbine generator, as illustrated in Table 2.1 They

provide choices of unit rate spanning from less than 25 kVA to more than 265,000kVA

Each category is distinguished not just by size, but by design and operating

characteristics unique to its range

Due to their unique design and size, gas turbine generators have the following

characteristics in their market niche [9]:

• Long durability with low maintenance

• Simple design with a high potential for inexpensive, high volume manufacturing

• Compact and modular, easy to install and repair

• Noisy and hence requiring considerable muffling, which reduces output and fuel

efficiency

• Relatively low fuel efficiency compared to other DER types, e.g reciprocating

engines

Table 2.1 Comparison of gas turbine generator categories [9]

Available range (kVA) 20 – 500 650 – 10,000 12,500 – 265,000

Original design based on Bus, truck engines Aircraft engines Utility needs

Typical fuels Nat gas, diesel Nat gas, diesel Nat gas, fuel oil

Out of service once every Two years Eight months Year and a half

Generator type used DC with AC conv AC sync AC sync

Can be bought and installed in A week Two months A year or two

Overall, gas turbines are simple, compact, robust, but not outstandingly efficient devices

compared to reciprocating engines However, exhaust heat of gas turbine can be used for

co-generation in a waste heat plant In this case, the overall fuel efficiency of some

turbine co-generators is on the order of 60% This renders the turbines more suitable for

installation in close proximity to user sites

Fuel Cell Powered Distributed Generators

Fuel cells take a unique approach to using fossil fuel for producing electricity Unlike the

reciprocating piston engine or gas turbine, which burns fossil fuel to produce motion to

drive a generator, the fuel cells oxidize hydrogen in a fossil fuel in a chemically

controlled (catalyst-driven) process According to the chemical basis for their operation,

fuel cells fall into five categories Ranked in ascending order of internal temperature, they

are: proton exchange membrane fuel cells (PEMFC), alkaline fuel cells (AFC),

phosphoric acid fuel cells (PAFC), molten carbonate fuel cells (MCFC), and solid oxide

fuel cells (SOFC)

The unique approach of burning fossil fuel offers fuel cell several advantages over

rotating fossil fuel generation They are: high efficiency, very low noise and vibration,

low pollution, easily re-usable heat (exhaust) output, and modular availability and quick

installation

Despite these distinct advantages, there are still some barriers preventing the wide spread

of fuel cell application These include high initial cost, maintenance skill needs, fuel

sensitivity, and unproven track record The high price of fuel cells, as illustrated in Table

2.2, is the main factor impeding their expansion This issue is being vigorously addressed

by many agencies and manufacturers, such as DOE (U.S Department of Energy), GRI

(Gas Research Institute), DOD (U.S Department of Defense), and EPRI (Electric Power

Research Institute) It is predicted that this attention will result in fuel cell cost drops,

making them more viable in some situations, by the year of 2005 [9]

Combined with these distinct advantages and disadvantages, fuel cells are the best choice

among DER categories in some applications, particularly in those sensitive environments

in which noise, vibration, or emissions are a concern

Table 2.2 Typical fuel cell DER cost compared to representative DERs

Renewable Resource Distributed Generators

Renewable power generation resources can be identified as DER due to their nature of

being small, modular, and geographically distributed They include solar thermal power

generation resource, photovoltaic (PV) generation resource, wind-powered generation

resource, low-head hydropower system, geothermal system, biomass system, tidal power

system, and ocean-current turbine The motivation to harness renewable resources for

electricity generation is seldom to obtain local peaking support or reliability backup, but

mostly to obtain ‘green’ energy production

Renewable resources power generation systems make far less environmental impacts than

fossil fuel and nuclear power generation, but are less cost-effective Most renewable

energy sources are subject to some degree of unpredictability in their energy availability

and hence the net power output To obtain dependable and dispatchable power output,

they are combined with some form of energy storage, often in “non-electric” form

Besides, most renewable generation plants have site requirements that constrain their

geographical distribution

Distributed Energy Storage Systems

Application of energy storage can augment DER in three aspects: energy stabilization,

ride-through capability, and dispatchability Classified according to the storage medium,

there are three categories of energy storage systems, namely: chemical, electrical, and

physical The chemical energy storage system normally uses a variety of battery

technologies, including lead-acid, nickel metal hydride, lithium, sodium sulfur, et cetera

Superconducting magnetic energy storage (SMES) system and capacitors are two

technologies used to store energy electrically Physical means to retain energy include

thermal storage, pumped hydro storage, compressed air storage, spinning flywheels, and

pumped and compressed fluids

Energy storage systems always involve trade-offs among a number of factors in

performance, the most important ones being storage capacity, power output level, service

lifetime, and cost All these above-mentioned approaches are still not satisfactory in the

sense of inexpensive price, sufficient capability, and proven long term durability

low-speed flywheel systems for high-energy/low-power applications, are believed to have

the best potential to meet early 21st century DER system needs [9]

2.2 MICROGRIDS

2.2.1 Concept and Benefits of Microgrid

Microgrid can be described as a distribution system with several types of DERs serving a

set of electric loads that are either residential, commercial, industrial, or a combination of

any of these three [7] It extends the distributed generation concept to encompass several

DERs linked together using advanced sensor, control, and communication technologies

These clustered DERs could be operated either connected with or separated from the

established power system, matching power quality and reliability more closely to local

end-user requirements [6] A microgrid consists of a localized grouping of loads and

generation operating under a form of coordinated local control, either active or passive

At the heart of the microgrid concept is the notion of a flexible, yet controllable interface

between the microgrid and macrogrid Essentially, this interface isolates electrically the

internal operations of the microgrid from that of the macrogrid, while maintaining their

economic connection Within the microgrid, the conditions and quality of service are

determined by the needs of the customer Outside the microgrid, flows across the

interface are determined by the needs of the wider power system

Microgrids can offer significant benefits in terms of improved reliability, support for

transmission and distribution, greater efficiency through combined heat and power, and

power system designs that potentially cost less Although there is much promise for

microgrids, it is not yet clear whether microgrids can emerge as anything other than a

niche application or if they will become a significant part of the power system

infrastructure

2.2.2 Hypotheses for Practical Microgrid

The concept microgrid proposes radically different methods for operating the power

system In developing the concept, it was assumed that the legislative barriers for the

entry of DERs into the power system have been overcome and that DERs amount to a

significant percentage of the total generation mix The following hypotheses are bases of

the expansion of practical microgrid over the next decade [6]

1 DER technologies will improve significantly

2 Site constraints, environmental concerns, fossil fuel scarcity, and other limits will

impede continued expansion of the existing electricity supply infrastructure

3 The potential for application of small scale combined heat and power

technologies will tilt power generation economics in favor of generation based

closer to heat loads

4 Customers will desire to control over service quality and reliability

5 Power electronics will enable operation of semi-autonomous systems

2.2.3 Autonomous and Non-Autonomous Microgrids

Depending on whether they are connected to the macrogrid, there are two kinds of

microgrid, namely autonomous microgrid and non-autonomous microgrid An

autonomous microgrid is an electrically isolated set of power generators that supply all of

the demand of a group of customers In this mode, the microgrid is a stand–alone grid and

serves the customers without an external grid connection A non-autonomous microgrid

is one which is served by DERs but is operating in parallel with the utility The microgrid

produces power while interconnected to the macrogrid and may have energy exchange

with the utility system [7]

To set up a successful autonomous microgrid, it will have to include several different

types of DERs for the purpose of providing the necessary reliability Since the utility

generation, transmission, and distribution network is a complex system which is very

difficult to be imitated by the microgrid with respect to reliability, feedback control,

communication, and availability, the autonomous microgrid planner may face certain

challenges:

1 An outside source will be needed to help the customer in processes such as

synchronization and coordination

2 Possible system faults necessitate system protection for the microgrid which will

require technical expertise to set it up

3 The system must provide supply and load balance, to maintain stable frequency

and voltage

Overall, the development of an autonomous microgrid will require true engineering

analysis to design and implement [28]

In the case of non-autonomous microgrid, many of the challenges of the autonomous

microgrid either change or disappear The utility grid can provide base levels for both

frequency and voltage The customer could go by the utility rules on parallel

interconnection and enjoy the following benefits:

1 In the event of random failure of the DERs, the maintenance can be performed

offline while the customer is served uninterrupted by the utility

2 The excess power could be sold back to utility

3 If the utility has a power outage, the microgrid can disconnect itself from the

utility grid and keep on serving its customers in a stand-alone mode

Besides, utility sees benefits too:

1 The utility can avoid or postpone system improvement projects if DERs are

implemented in the non-autonomous microgrid mode

2 The utility can have new business ventures to design, implement, and operate

microgrids

3 A possible benefit to the utility is the reduction of reactive power needed for unity

system operation

There are many technical and non-technical concerns for the establishment of both

autonomous and non-autonomous microgrids Of the two options, the latter is a more

beneficial mode of operation for both the utility and the customer [7]

2.3 POWER PARKS

A related concept currently being promoted by the US Department of Energy (DOE) is

the power park - a collection of DERs, linked by a minigrid and incorporating advanced

telecommunications, to deliver high quality power and exceptional reliability to

consumers Power parks are collections of optimized DER technologies and processes

joined by a minigrid, often by a district energy loop and advanced telecommunications

technologies They are generally grid-connected but intended to operate as power islands

[11]

The power park systems are designed to be more energy efficient and environmentally

sound by utilizing DERs Well-designed power parks offer an integrated, lowest cost,

reliable system where the operators can match energy generation and delivery energy to

end-users through a combination of electric, natural gas, and telecommunications

services

The integration of DER technologies within a power park development can potentially

provide a range of synergistic benefits including [11]:

• Energy self-sufficiency;

• End-user power quality and reliability;

• Power system reliability;

• Integration with infrastructure;

• Predictable energy costs; and,

• Environmental benefits

An example of a power park is a 660 kW wind farm in Kotzebue, Alaska [11] DOE has

worked with a remote Native Alaskan community located north of the Arctic Circle in the

design and installation of the wind plant, which supplements electricity produced by an

existing 11.3 MW diesel power plant Although the total capacity of this prototype wind

plant is relatively small, it is capable of providing approximately 5~10% of the electricity

required by the village, at a cost of nearly 13 cents/kWh, which is about one-third less

than the 20 cents/kWh of the Kotzebue diesel plant The high electricity cost of the local

diesel plant is due largely to the great expense of transporting fuel and equipment to these

remote sites

DER technologies deployed in power parks are more efficient and environmentally

sound As an integrated 'systems approach' to delivering power when and where it is

needed, power parks are expected to play an important role in a restructured industry, and

can improve our energy management opportunities in both the near and long term

2.4 VIRTUAL UTILITY

New technologies, such as microgrids, and new financial instruments, such as energy

options, further allow the creation of a new concept, “virtual utility”, which can be

defined as a flexible collaboration of independent, market-driven entities that provide

efficient energy service demanded by consumers without necessarily owning the

corresponding assets [10]

A virtual utility could lease or own several DERs and remotely dispatch them in

accordance with its own interests It responds to external signals, such as buy-back price

signals, and remotely monitors and controls the DERs A virtual utility may also provide

other types of services, such as improved power quality or load management In fact, the

DERs and other equipment used to provide services could be owned by other entities and

managed by the virtual utilities Most or all functions necessary for the operation of the

virtual utility, such as maintenance, billing, and information technology system, could be

outsourced The virtual utility becomes a metaphor for flexible, customer-oriented energy

service provision

The virtual utility, a distributed approach of generating and delivering electricity, may

represent an architectural innovation in the sense that it alters the traditional components

used to manufacture electricity and hence alters the nature of the product in a

fundamental manner It minimizes non-value-adding activities (such as excess generation

capacity), manufactures electricity on a just-in-time basis, and provides

high-value-adding services These justify virtual utilities as a considerably more advanced form of

the currently evolving business model of power utilities [12]

There are several advantages for the hypothetical concept of virtual utility, against

utility’s large, central power plant First, the business can be built up gradually, in

response to demand Second, all DERs can be planned, installed and put into operation

far quicker than a large power plant Third, much less initial capital is needed, and the

financial risks are smaller than having one big power plant

Chapter 3 THE ITERATION APPROACH

For the purpose of studying the economic impact of DERs on the power system, an

enhanced approach, the Iteration Approach, is developed in this chapter, to ascertain the

system’s minimum overall cost with the involvement of DERs The first part of this

chapter explicates the approach’s structure, a multi-objective framework Its software

implementation is introduced next Finally, this approach, as well as a conventional

non-DER approach, is applied to a study system The numerical simulation results are

presented, compared and discussed

3.1 OUTLINE OF THE MULTI-OBJECTIVE FRAMEWORK

All utility generators are dispatched and coordinated by a centralized control center,

which makes and executes dispatch plans according to provided load information such as

daily load curves Conventionally, load demands are allocated optimally among utility

generators to achieve the utility target of minimum overall cost in a non-DER system

In the new hybrid generation environment, operators of DERs are profit-oriented entities

so that their primary objective is profit maximization The electricity buy-back price

offered by the utility is being monitored by DERs Given the price, DER operators

independently make their decisions on whether to commit their DERs and how much

power to generate according to their individual profitability In this regard, DER

operators have dispersed independent targets, which are different from utility’s

coordinated one

As DERs get involved in power generation with targets different from the utility’s target,

a mechanism is necessary to protect the interests and coordinate the operations of both

utility and DERs in the hybrid generation environment For this purpose, a

multi-objective framework is established in this chapter with three modules, namely the utility

module, the DER module, and the customer module, as illustrated in Figure 3.1 The

operations of the utility and DERs are optimized according to their respective objectives